Name Your Price – a pricing experiment

After reading Robin Sloan’s fantastic piece about rethinking the idea of the static price tag, I came back from my holidays dying to experiment with flexible pricing myself.

From reading about other experiments I knew that giving people the choice to pay (next to) nothing usually attracts a lot of opportunists that care more about scoring a bargain than paying for something they really appreciate. So I was expecting the average price paid to be well below the standard price for a copy. And so, in order to decrease my chances of losing a lot of money in this exercise, I decided to set a few limits. Here is what the experiment looked like:

The Setup

I designed a simple page with a three-step checkout process:

In the first step, visitors could pick one of the available back issues. I intentionally didn’t make future issues available for pre-sale because, well, selling things I haven’t even produced yet for potentially less than cost price is a pretty dumb thing to do.

The second step offered a slider to define your own price — from $5 at the minimum to $38 at the max. With $5 as a minimum I could at least minimise the impact of a worst case scenario and have some of my shipping cost covered. I chose $38 as a maximum amount simply because it would put the handle of the slider right in the center at $22 (the regular price), which was also the default setting when opening the page.

Just below the slider I offered a bit of insight into how the chosen price affects Offscreen as a business. Here are the tiers and their message:

$5 – $7: Significant Loss
If all copies sold at this price, Offscreen would generate a significant loss, killing the magazine instantly.

$8 – $10: Small Loss
If all copies sold at this price, Offscreen would generate enough money to cover shipping, but would still struggle to pay for other expenses.

$11 – $13: Break-Even Point
If all copies sold at this price, Offscreen would generate enough money to break even on expenses, but the publisher would essentially work for free full-time.

$14 – $20: Small Profit
If all copies sold at this price, Offscreen would generate a small profit, enough to operate as a side project producing 1-2 issues per year.

$21 – $23: Sustainable Profit
If all copies sold at this price, Offscreen would generate a sustainable profit, allowing the publisher to create at least 3 issues per year full-time.

$24 – $30: Profit for Growth
If all copies sold at this price, Offscreen would generate enough profit to hire a part-time editor to increase quality and content for at least 4 issues per year.

$31 – $37: Profit for Expansion
If all copies sold at this price, Offscreen would generate a enough profit to hire 1-2 people full-time to increase quality and frequency, and the brand could expand to events and other projects.

Step three had a simple PAY NOW button with this message next to it: “To make this experiment fair and available to as many people as possible, we kindly ask you to order one issue at your custom price only.”

I also decided to limit the availability of this offer to 18 hours (with a countdown displayed on the page), largely for two reasons: once again to limit my chances of losing a lot of money, but also to create a sense of urgency and scarcity, one of the oldest tricks in the marketeer’s book.

The Result

I launched the experiment on a Wednesday night at midnight local time (Melbourne, Australia) when most people in Europe and America are awake or waking up soon. After a fairly restless night worrying that the experiment would somehow take off on social media and I’d become a victim of my own success, the counter stopped at a total of 71 sales the next day.

Here are the sales according to price paid:

Take-Away

First off all, my assumptions about people taking the opportunity to grab a bargain were validated. 21 people paid the minimum price ($5), compared to just one person sliding it all the way up to $38. (If you are reading this: you are awesome!)

Several people either disregarded or didn’t see my request to order one issue only. 6 customers went through the process several times and ordered all available issues at the lowest price (only shown as one order in the graph). I followed up with them and informed them that I had to cancel all but one of their orders and to my surprise their response was polite and apologetic, and a few of them even asked me to cancel these orders, but keep the money as a donation.

Several people that ordered their copy at the minimum price emailed me to tell me that they would love to give more, but can’t for personal/economic reasons. They explained that this was a unique chance for them to ‘test’ Offscreen. Unsurprisingly, many of these orders came from countries where the economy is not doing so well (e.g. Spain, Portugal, Brazil, Ukraine, Italy). And there was the occasional student in that group too.

The average price paid ends up being $12.40, which is just above my break-even point as stated below the slider. I don’t think this is a coincidence. Most sales congregated around the ‘break-even tier’ and I like to believe that knowing where it ‘doesn’t hurt me’ influenced customers’ decision. Though paying the ‘break-even’ price doesn’t make Offscreen sustainable, for the customer it’s a seemingly fair balance between scoring a bargain and not leaving the maker out of pocket.

Other than that, I don’t think there is much else to take away from this experiment. Considering that I offered back issues only, my existing and most loyal readership didn’t participate and hence didn’t get a chance to express how much they value Offscreen. I’m not sure exactly how many of these orders come from new vs. returning readers, but a few random checks showed that many of the customers in the lower pricing tiers are buying Offscreen for the first time (which is great).

Is such an experiment worth the effort? I believe so. There are a lot of variables that could be changed to see how it affects people’s decision to pay a higher or lower price. How did my messages/tiers influence their decision? Should I have made a future issue available for purchase and thereby encourage existing readers to have a say? Should I have run it for longer than 18 hours in order to have a bigger sampling group? How could I change the UI/UX to encourage a higher price?

Rather than making decisions about ‘the ideal price point’ based on one such experiment, I think you’d have to run several campaigns like this for it to be a reliable and realistic source for your pricing strategy. And of course, there will always be opportunists and poor students. ;-)

Marks of quality

The content-first approach to modern publishing may turn out to be a winner, even as the business challenges for journalism remain significant and unresolved… Soon, if it’s not true already, magazine brands will matter more as marks of quality or tone than they do as gatherers and arrangers of content in a unified experience… That is the standard to which magazines of the mobile era must aspire.

A great quote of a quote from a great article about the future of digital publishing.

Me vs. us

If you follow Offscreen’s behind-the-scenes stuff here on the blog you know that I’m big on making things personal. I don’t pretend to be bigger than I am — Offscreen is a one-man magazine.

However, one little issue I keep stumbling upon when communicating with my readers is the ‘me vs. us’ problem. In 9 out of 10 cases, writing copy from my own view works just fine, but there are occasions where it just sounds a little amateurish, in particular when talking about the magazine as a business and not just a ‘thing I do’.

For instance, on the Contact page, inviting readers and contributors (or even sponsors) to get in touch with me would make Offscreen sound like a little ‘zine’ I throw together during my lunch break. Telling my readers to contact us still appears more meaningful and simply more professional. And while I don’t usually care about standard business lingo, it does seem more mature in certain situations.

And sure, there are ways around using ‘me’ or ‘us’ altogether, but it often makes communication a lot less personal.

So I guess there are rare cases when writing about a one-person business from the perspective of a (fake) team makes sense, as much as I hate inconsistency. I’m sure I’m not the only one dealing with this little predicament. How do you handle this situation in your own one-person business? Any emails or tweets are welcome.

Have faith in what you make

Making something new takes patience. But it also takes faith. Faith that everything will work out in the end. During the development of most any product, there are always times when things aren’t quite right. Times when you feel like you may be going backwards a bit. Times where it’s almost there, but you can’t yet figure out why it isn’t. Times when you hate the thing today that you loved yesterday. Times when what you had in your head isn’t quite what you’re seeing in front of you. Yet. That’s when you need to have faith.

Something worth paying for

At the fantastic The Modern Magazine conference here in London yesterday, I had a brief conversation with another publisher whose magazine no longer exists. She said that when she announced the release of the final issue earlier this year, suddenly a lot of support in the form of emails and tweets came flooding in from readers she didn’t know she had — people expressing their disappointment and sadness that one of their favourite magazines was closing its doors.

What surprised her most was the fact that more people were actually reading the magazine than buying it (assumingly getting it handed down from friends or finding it in cafés and other places). Apparently, there was also a large group of supporters that bought the occassional issue and followed the project online, but never really committed to being a regular reader. And they, too, were sad seeing a project disappear that they appreciated, even if they just followed it from the sidelines most of the time.

The overwhelming response to her announcement of bringing the magazine to an end surely made the decision more difficult, but “nice words don’t really pay the bills”, she said frustrated. It reminded me of something Cameron Moll mentioned in his interview with Offscreen. He said: “There’s an opportunity for a Buy Bootstrap movement along the lines of Buy Local or Buy Organic.”

The ‘passive supporter problem’ (if it can/should be called that!?) is, of course, not only prevalent in the magazine scene, I think it can be applied to all ‘indie’ makers out there. I can easily think of a handful of app developers and bloggers with tons of supporters that really want to see the project grow and succeed, but that rarely take practical action (in most cases by signing up for a paid account, paying a small membership fee, etc.) to actively enable the creators to continue the work they appreciate.

Of course, there is a lot of great ‘indie’ stuff out there and you can’t throw your money at them all. So what to do?

In the last few years, I’ve made a conscious effort to find out more about my favourite products and services, by following them online, by signing up to their newsletter, and by meeting and talking to them in person when I get a chance. If I’m convinced that their values and efforts align with my own, I try to be an active supporter and pay my fair share. This doesn’t just apply to the digital world, of course, I try to apply the same principles to, say, charities or my local shops down the road.

I guess it all comes down to being an informed consumer. Take a moment and think about the tools, products, and services that really make a difference in your life, and then show them your appreciation through proactive support, which in most cases (but not always) means adding them to your list of things worth paying for.